[PODCAST] US Open Rundown 13th March 2020
Norges Bank emergency rate cut to 1.0% from 1.50%; decision was unanimous. Ministry of Finance has, at the Norges Bank's recommendation, elected to cut the countercyclical capital buffer to 1.0% from 2.5%. (Newswires) A decision which resulted in the NOK, which has been under significant pressure recently, strengthening somewhat as the measures are designed to provide support to the financial system. Are scheduled to meet on March 19th . Subsequently, Governor Olsen reiterated they are prepared to cut further if necessary.
PBoC are to cut RRR for some banks by 50-100bps under inclusive finance scheme and an additional 100bps for joint-stock banks from March 16th, will unleash CNY 550bln, reports state. Will implement prudent monetary policy and be more flexible & are to keep liquidity reasonably sufficient and not open the credit floodgate. (Newswires)
BoJ announces that as of next week, the Bank will provide ample liquidity using market operations with long maturities. Carried out unscheduled outright purchases of JGBs today; note, they also purchased JPY 101.4bln of ETF’s today. Will continue to carry out further outright purchases of JGBs as needed, taking into account market conditions are to increase the number of issues of JGSs offered. Could increase purchases of commercial paper & corporate bonds at their meeting next week, according to sources (Newswires)
Riksbank says they are prepared to take further measures and to supply necessary liquidity even between meetings; to take up to SEK 500bln to safeguard credit supply. Additionally, Sweden have lowered their counter-cyclical capital buffer to 0% from 2.5%; corresponds to circa SEK 45bln. Subsequently, Governor Ingves says can undertake currency intervention and rate cuts if we think this is a suitable measure are ready to take further measures if this is needed; all measures in the toolbox are available, can give liquidity support to banks, and can purchases bonds. (Newswires
ECB's Lane says governing council retains the option of future cuts in the policy rate if warranted, temporary fluctuations in the distribution of purchase flows both across asset classes and across countries in response to the "flight to safety". (Newswires)
CBR says the RUB drop, due to coronavirus and lower oil prices, does pose a significant upside risk for inflation; will accelerate towards the 4% target faster than was expected. (Newswires)
Mainland China reported 8 additional cases of coronavirus and 7 additional deaths on March 12th vs. Prev. 15 additional cases and 11 additional deaths on March 11th, to bring China's total confirmed cases to 80813 and death toll at 3176. (Newswires)
Japanese Parliament have approved an emergency bill to give PM Abe emergency powers if necessary due to the coronavirus. (Newswires)
Italy total coronavirus cases increased to 15113 (Prev. 12462) and the death toll rose to 1016 (Prev. 827), while Switzerland is reportedly to discuss closing its border with Italy today. (Newswires)
South Korea reported 110 additional coronavirus cases for a total of 7979 and death toll increased by 1 to a total 67, while the number of cured exceeded daily infections for the first time. (Newswires)
UK Scientific Adviser said it is likely the UK has somewhere between 5k-10k people infected at the moment, while the Chief Medical officer raised risk of coronavirus to high and confirmed we are now in the delay stage, moving from trying to contain the spread. (Newswires/Sky News)
Canadian PM Trudeau’s wife has tested positive for coronavirus. (BBC) This comes after the PM announced that he is in self-isolation after his wife showed symptoms of the virus.
Eurogroup President Centeno said EZ Finance Ministers will agree to a ‘very large’ policy response to the coronavirus, expecting it to be above the EUR 27bln aggregate level ECB’s Lagarde called for; expects measures to be endorsed on Monday and outlined today. (FT) EU's Economic Commissioner Gentiloni will reveal a coronavirus package on Friday, and added we need coordinated action in Europe and US. (Newswires)
German Finance Minister Scholz and Economy Minister Altmaier are planning billions of EUR in financial aid to assist Co's affected by the coronavirus, DPA News citing sources. (Newswires)
USTR granted additional tariff exclusions on medical products from China, while there were separate comments from NIH’s Fauci that additional travel restrictions would be seriously considered if the dynamics of the outbreak mandate it. (Newswires)
Belgium PM Wilmes announced to close all bars, restaurants, sports events and schools due to coronavirus until April 3rd, while public transport will continue to run although companies are encouraged to allow staff to work from home. Elsewhere, Portugal is to shut all schools nationwide beginning on Monday and will re-evaluate on April 9th. (Newswires)
Asian equity markets initially crashed overnight as the global turmoil persisted amid further coronavirus-related disruptions and following the near-double-digit losses on Wall St where stocks had their worst day since the Black Monday of 1987. Investor sentiment took a hit from all angles including the lack of solid stimulus efforts so far from US and its ban on travel from the EU, while some countries, businesses and sporting events also announced shutdown measures. ASX 200 (+4.4%) was in panic mode at the open and was dragged lower by heavy losses in financials and the commodity-related sectors with gold miners the worst performers as the precious metal proved to be no hiding place for the ongoing bloodbath, although the index then rebounded as stock markets and US futures recovered from lows with some also attributing it to the RBA injecting AUD 8.8bln of funds through repos during the early morning chaos. Nikkei 225 (-6.1%) saw losses of over 1500 points and briefly slipped below the 17k level for the first time since 2016, before momentarily retracing the majority of the declines. Elsewhere, Hang Seng (-3.2%) and Shanghai Comp. (-1.2%) conformed to the overnight disarray amid further PBoC liquidity inaction and as China’s industry ministry suggested the global coronavirus epidemic places uncertainty on China's work resumption, while stock markets in South Korea, India, Indonesia and Philippines all triggered circuit breakers earlier in the session but then recouped most the losses in which India briefly retraced the full 10% slump. Finally, 10yr JGBs failed to benefit from the wide-spread risk aversion and off-schedule BoJ announcement to buy a total of JPY 700bln of JGBs, as prices extended on the prior day’s selling to test the 153.00 level where support eventually held.
PBoC skipped open market operations for a daily net neutral position. (Newswires) PBoC set USD/CNY mid-point at 7.0033 vs. Exp. 6.9908 (Prev. 6.9641)
China Vice Industry Minister said work resumption for small and medium sized firms outside of Hubei is around 60% and for larger scale firms the rate is over 95%, although the Industry Ministry also noted that the global coronavirus epidemic brings uncertainty to China's work resumption. (Newswires)
China Banking Regulator official said banking institutions have issued CNY 1.4tln in loans related to virus control and prevention, while China is also to stabilize and increase people's property income. (Newswires)
Indonesia confirmed a 2nd fiscal stimulus package to tackle the impact of the coronavirus in which IDR 120tln or 0.8% of GDP will be provided to the economy. (Newswires)
US House Speaker Pelosi said lawmakers and the White House have neared an agreement on coronavirus legislative package and hopes to make an announcement on Friday, while she noted that the coronavirus bill includes free coronavirus testing and paid sick leave. (Newswires)
Polling USA tweeted that Biden was ahead of Sanders in Florida (65% vs. 27%), Ohio (57% vs. 35%) and Illinois (57% vs. 36%) in an Emerson telephone survey conducted yesterday. (Newswires)
UK and EU have agreed to “dial down the rhetoric” over Brexit with both sides expected to produce legal texts of their negotiating positions next week; with diplomatic sources claiming both sides agreed to “lower the temperature”. (Guardian)
UK Chancellor Sunak is expected to deliver a “painful” budget in November as previous tax-raising plans were shelved amid the virus outbreak, according to sources. (Telegraph)
Italy’s market regulator is to introduce temporary short-selling ban on some stocks on Friday in which it stated that the short-selling ban applies to 85 stocks and strengthens the ban on naked short-selling, while Spain’s market regulator is to ban short selling of 69 Spanish stocks. UK FCA has taken similar measures. Note, Deutsche Boerse decided against instigating a ban on short selling. (Newswires)
No ECB policymaker proposed a rate cut, or a different amount of QE than the final decision, according to sources. (Newswires)
Twitter sources reported US jets over Iraq skies as multiple Kata’ib Hezbollah positions in Iraq were targeted by heavy airstrikes and US officials later confirmed they launched retaliation strikes for recent attack on Camp Taji, while there were also reports of a rocket attack on the US base in Kirkuk, Iraq. (Twitter)
EQUITIES – Circuit Breakers Available Here
European equities attempt to claw back some lost ground [EuroStoxx 50 +6.1%] having closed Thursday’s session with double-digit losses across major bourses. Gains are relatively broad-based, albeit Italy’s FTSE MIB outperforms regional peers after reports that the Italian market regulator will introduce a temporary ban on short-selling on some stocks today – applying to 85 stocks. Furthermore, press reported that the country could spend up to EUR 16bln on the first stimulus move vs. prior UR 12bln– scheduled to be unveil later today. Sectors are all in the green, albeit off highs, with Energy outperforming amid the rebound in the complex, whilst Consumer Discretionary pulled back from its earlier outperformance as the Travel & Leisure sector dipped back into negative territory. Individual movers largely reflect a consolidation of yesterday, although notorious copper miners BHP (+12.0%) and Rio Tinto (+11.0%) taking advantage of the price action in the red metal. Similarly, BP (+8.2%), Shell (+8.6%) and Total (+8.8%) benefit from the upside seen in the energy markets. Elsewhere, Wirecard (+15.0%) rose as much as 30% at the open after the results by KPMG’s special audit so far noted that there is no need for the Co. to alter their financial statement, although Wirecard results have been delayed to April 30th as the investigation continues.
NOK/SEK/CNH - A double dose of good fortune for the hitherto unlucky Norwegian Krona via a rebound in crude prices and additional stimulus as the Norges Bank followed the Fed and BoE with a ½ point ease in the depo rate in advance of its scheduled March policy meeting next week. Eur/Nok reversed further from fresh all time highs above 11.4500 in response to sub-11.2000, as the Bank also shaved 150 bp off the counter-cyclical buffer for banks before rolling out new F-loans at the lower 1% benchmark rate. Conversely, Eur/Sek remains elevated within a 10.7740-9410 range following relatively limited anti-nCoV policy measures from the Riksbank in the form of a fresh credit line and pledge to provide more funding and QE if required, though Sweden’s FSA did slash the CCB to zero from 2.5%. Moreover, in subsequent pressers Norges Bank and Riksbank Governors both underlined that lower benchmark rates are an option if economic conditions worsen, and for the latter that could be warranted given another spike in jobless rates. Not to be completely outdone, the PBoC preannounced lower RRRs ranging from 50-100 bp, and as much as -200% for joint stock banks all to be rolled out from Monday, helping the Yuan recover from under 7.0000 and risk sentiment overall.
AUD/NZD/CAD - Although their US counterpart remains elevated in its own right (DXY pivoting 97.500), the Aussie, Kiwi and Loonie are all benefiting from a broad revival in risk appetite and especially the former after the RBA supplemented fiscal support with a hefty liquidity boost that helped the ASX turn a whopping loss into a 4%+ gain by the close. Aud/Usd has reclaimed 0.6300+ status and Nzd/Usd is close behind circa 0.6150, while the Loonie is also drawing impetus from the aforementioned bounce in oil to test resistance at 1.3800 vs lows near 1.3950.
GBP/CHF/EUR/JPY - The Pound has recouped some losses with Cable back up to 1.2600 from close to 1.2500 at one stage and Eur/Gbp reversing through 0.8900, but Sterling is lagging amidst ongoing COVID-19 and Brexit uncertainty. Similarly, the Franc is cautious awaiting the SNB straddling 0.9450 and hovering just above 1.0550 against the Euro that has regrouped after yesterday’s post-ECB slide in advance of the EU revealing its financial package to fight the pandemic. In stark contrast, the Yen is sharply underperforming on safe-haven unwinding as Usd/Jpy rallies to 106.50+ in wake of yet more speculation about the BoJ expanding its already ultra-accommodative policy with more JGB and other security purchases, ETF buying etc.
EM - No real surprise to see the Rouble revel in Brent’s resurrection alongside WTI and other commodities that have been crushed this week, but the Lira seems reluctant to get too carried away due to persistent jitters about relations with Russia on the Syrian front.
EU debt remains under pressure in contrast to a more mixed/divergent tone in US Treasuries as bonds acknowledge the latest recovery rally in stocks and ponder whether this will prove to be another dead cat bounce or more meaningful correction leading to a sustained bear retracement. Only time will really tell, but the final Wall Street session of the week could provide the next clue and the White House will play its part if the much anticipated support plan emerges. Data-wise, US import and export prices are due, but no doubt overshadowed by the more forward-looking preliminary Michigan sentiment survey as the first piece of economic news for March.
A day of consolidate/reprieve for commodities following the prior session’s hefty sell-off after prices fell almost 9%, which was induced by materialising virus woes coupled with inept measures from the US to stem the impact of the virus. WTI and Brent front-month contacts have nursed a bulk of yesterday’s losses with the former residing just under USD 33.0/bbl at the time of writing, having momentarily breached the level to the upside in earlier trade. Meanwhile, Brent May’20 tested, but failed to breach resistance at USD 35/bbl. Elsewhere, spot gold also attempts a recovery after yesterday’s flee to cash saw the yellow metal trade in close proximity to USD 1550/oz, although prices have waned off today’s current high of ~1594/oz. Copper prices meanwhile rebounds with a vengeance amid Aussie stimulus measures overnight coupled with a turnaround in sentiment and cautious comments from miner Vale on potential suspended operations due to coronavirus, having more than recouped the prior session’s downside to trade comfortably above USD 2.50/lb vs. a low of USD 2.41/lb.
CME raised palladium futures NYMEX margins by 9.8% to USD 28000/contract from USD 25500/contract and raised platinum futures NYMEX margins by 20% to USD 3000/contract from USD 2500/contract. (Newswires)
Goldman Sachs said it continues to expect Brent to underperform WTI as US export incentive will need to shut, while it estimates global demand lost is near 4.5mln bpd. (Newswires)
Brazilian miner Vale said it could undertake contingency measures or eventually suspend operations due to coronavirus concerns. (Newswires)